Neo Material Technologies reports first quarter 2012 financial results

• Revenues of US$179 million
• EBITDA of US$36 million
• Net cash position of US$94 million
• Net Income of US$12 million or US$0.11 per share

TORONTO, May 8, 2012 /CNW/ -  Neo Material Technologies Inc. (TSX: NEM) (the "Company") today reported its financial results for the three-month period ended March 31, 2012. Unless otherwise specified, all currency amounts are expressed in U.S. dollars.

For the three-month period ended March 31, 2012, revenues were $179 million compared to $203 million in the previous quarter, and $133 million in the corresponding period in 2011.  The Company reported net income attributable to equity holders of NEM ("Net Income") of $12 million, operating income plus depreciation and amortization ("EBITDA") of $36 million and earnings per share ("EPS") of $0.11, and $0.10 on a basic and fully diluted basis, respectively. This compares to first quarter 2011 net income of $32 million, EBITDA of $43 million and EPS of $0.27, and $0.26 on a basic and fully diluted basis, respectively. Operating income was $33 million compared to $41 million in the corresponding period in 2011.

On March 8, 2012, the Company announced that it had entered into a definitive Arrangement Agreement (the "Arrangement") with Molycorp, Inc. ("Molycorp").  Under the Arrangement, Molycorp will acquire 100% of the outstanding common shares of the Company for approximately Cdn$1.3 billion.

The price of the Company's common shares increased by 53% from Cdn$7.33 to Cdn$11.22, between December 31, 2011 and March 31, 2012. As a result, the Company incurred a $7 million charge associated with share-based compensation. Excluding the impact of this share-based compensation expense and Molycorp transaction related expenses, net income, EBITDA and basic EPS were $21 million, $45 million and $0.18, respectively.

The transaction is expected to close in the second or third quarter of 2012, subject to customary closing conditions, including the receipt of regulatory approvals, approval of the Arrangement by 66 2/3% of the votes cast by the Company's shareholders, and approval of the Arrangement by the Ontario Superior Court of Justice.  The Arrangement provides for customary representations, warranties and covenants, including, among others, termination fees.

At March 31, 2012, the Company had a cash balance of $316 million and long-term debt amounted to $199 million.

"Our performance was in line with our expectations in the first quarter, which is historically our slowest seasonal period," noted Constantine Karayannopoulos, President and CEO. "While raw material costs and product prices are settling into more normal and sustainable levels, we are encouraged by the demand outlook, particularly in our Magnequench division, and remain confident in the growth prospects of our business over the coming quarters."

Based on management's current visibility and recent market trends, the outlook for the demand and growth at both operating divisions remain robust. Magnequench expects both supply chain output and inventories to increase, reflecting a return to normal levels following the Thai floods. Most companies in these industries anticipate improved unit volume sales in the end market for computers and servers, as new products are introduced. As market prices stabilize from their peak in the second and third quarters of 2011, Magnequench is seeing renewed interest by customers using Neo Powders for new applications. At Performance Materials, the division continues to expect global demand for its advanced rare metals and rare earths products to increase, driven by uses in energy efficient lighting, solar, hybrid electric cars, micro motors for energy efficient devices and wireless communication.

Magnequench

$000's (except for quantity shipped)	Q1 2011	Q2 2011	Q3 2011	Q4 2011	Q1 2012	Trailing Twelve Months
Quantity Shipped (tonnes)	1,725	1,671	1,256	1,222	1,286	5,435
Revenues	55,135	66,265	111,176	90,206	70,841	338,488
Operating Income^(1)	16,795	18,632	49,650	13,099	13,998	95,379

Performance Materials

$000's (except for quantity shipped)
	Q1 2011	Q2 2011	Q3 2011	Q4 2011	Q1 2012	Trailing Twelve Months
Quantity Shipped (tonnes)	1,555	1,770	1,176	938	1,147	5,031
Revenues	83,571	164,888	152,204	113,059	108,468	538,619
Operating Income^(1)	33,518	70,906	58,118	38,726	32,052	199,802

Consolidated

$000's (except for quantity shipped)
	Q1 2011	Q2 2011	Q3 2011	Q4 2011	Q1 2012	Trailing Twelve Months
Inter-segment sales	(5,908)	(15,010)	(15,541)	-	(457)	(31,008)
Revenues	132,798	216,143	247,839	203,265	178,852	846,099
Operating Income	40,651	81,984	109,252	44,042	33,402	268,680
EBITDA	43,378	84,520	111,776	46,586	35,815	278,697
Net Income attributed to equity holders of NEM	31,875	52,247	78,952	37,883	12,151	181,233
EPS (basic)	0.27	0.44	0.66	0.33	0.11	1.57

Impact of Share-based
Compensation⁽²⁾

$000's (except for quantity shipped)
	Q1 2011	Q2 2011	Q3 2011	Q4 2011	Q1 2012	Trailing Twelve Months
Share-based Compensation Expense (Income)	4,625	3,400	(5,223)	4,423	7,264	9,864
Adjusted Operating Income	45,276	85,384	104,029	48,465	40,666	278,544
Adjusted EBITDA	48,003	87,920	106,553	51,009	43,079	288,561
Adjusted Net Income attributed to equity holders of NEM	36,045	55,156	74,195	41,884	19,034	190,269
Adjusted EPS (basic)	0.30	0.46	0.62	0.36	0.17	1.65

	Note:
(1)	Divisional Operating Income (Loss) presented in the tables above excludes stock-based compensation expense.
(2)	The table above contains non-IFRS financial measures. Management believes these items are useful supplemental measures of the Company's operating performance and will assist readers in comparing operating results from period to period. These measures do not have any standardized meanings prescribed by IFRS and may not be comparable to similar measures presented by other companies. Readers should be cautioned, however, that these non-IFRS financial measures should not be considered as alternatives to financial measures calculated in accordance with IFRS.

Online Access

The financial statements and the Management's Discussion and Analysis will be posted to SEDAR (www.sedar.com and available online at www.neomaterials.com on or before May 9, 2012.

Notice of Shareholder Meeting

The Company will hold its Annual General and Special Meeting of Shareholders on Wednesday, May 30, 2012 at 10:00 am at the Trading Floor, The Design Exchange, 234 Bay Street, Toronto, Ontario.

About Neo Material Technologies

Neo Material Technologies Inc. is a producer, processor and developer of neodymium-iron-boron magnetic powders, rare earths and zirconium based engineered materials and applications, and other rare metals and their compounds through its Magnequench and Performance Materials divisions. These innovative products are essential in many of today's high technology products.  Magnequench's Neo Powders are used to produce bonded magnets, generally used in micro motors, precision motors, sensors and other applications requiring high levels of magnetic strength, flexibility, small size and reduced weight. Rare earth and zirconium applications include catalytic converters, computers, television display panels, optical lenses, mobile phones and electronic chips. The Company's rare metals products are primarily used in the wireless, LED, flat panel, turbine, solar and catalyst industries. The Company is headquartered in Toronto, Canada.

Forward Looking Statements

From time to time, the Company may publish forward-looking statements relating to such matters as expected financial performance, business prospects, technological developments, and development activities and like matters.  These statements involve risk and uncertainties, including but not limited to the risk factors previously described.  Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. Neo Material Technologies Inc. undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Financial Results follow

NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(All figures in thousands of United States dollars)

	March 31 2012 (Unaudited)		December 31 2011 (Audited)
ASSETS
Current
Cash and cash equivalents	$	315,889	$	306,757
Accounts receivable		72,536		65,923
Loans receivable		-		11,807
Inventories		254,842		273,631
Other current assets		10,201		20,182
Total current assets		653,468		678,300
Property, plant and equipment		61,409		58,487
Patents and other intangible assets		11,946		12,780
Deferred tax asset		28,362		27,300
Goodwill		58,031		58,031
Investments in associates		13,222		11,976
Other long-term assets		3,166		3,587
Total non-current assets		176,136		172,161
Total assets	$	829,604		$ 850,461
LIABILITIES AND EQUITY
Current
Bank advances and other short-term debt	$	22,620	$	25,862
Accounts payable and other accrued charges		62,169		93,745
Income taxes payable		27,692		30,609
Contingent consideration		8,277		8,257
Long-term debt due within one year		172		216
Total current liabilities		120,930		158,689
Long-term debt		199,102		198,020
Deferred tax liability		15,938		14,771
Employee benefit liabilities		2,826		2,812
Derivative liability		9,033		8,325
Other long-term liabilities		1,573		1,825
Total liabilities		349,402		384,442
Non-controlling interest		14,136		12,344
Shareholders' equity		466,066		453,675
Total liabilities and equity	$	829,604	$	850,461

NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - all figures in thousands of United States dollars, except per share information)

		Three months ended March 31
			2012		2011
Revenues		$	178,852	$	132,798
Costs of sales
	Costs excluding depreciation and       amortization		116,977		72,519
	Depreciation and amortization		1,585		1,861
Gross profit			60,290		58,418
Expenses
	Selling, general and administrative		13,804		9,405
	Share-based compensation		7,264		4,625
	Depreciation and amortization		828		866
	Research and development		4,992		2,871
			26,888		17,767
Operating income			33,402		40,651
Other expense (income)			898		(10)
Interest expense, long-term debt			4,019		3
Interest expense, other			891		236
Interest income			(544)		(753)
Foreign exchange loss			1,994		444
Income from operations before income taxes and equity income of associates			26,144		40,731
Income tax expense			13,447		8,192
Income from operations before equity income of associates			12,697		32,539
Equity income of associates (net of income tax)			1,246		260
Net income		$	13,943	$	32,799
Attributable to:
Equity holders of Neo Material Technologies, Inc.		$	12,151	$	31,875
Non-controlling interest in earnings of subsidiaries		$	1,792	$	924
		$	13,943	$	32,799
Earnings per share data attributable to equity holders of Neo Material Technologies, Inc.
Earnings per share, basic		$	0.11	$	0.27
Earnings per share, diluted		$	0.10	$	0.26
Weighted average number of shares outstanding, basic			115,141,281		120,022,092
Weighted average number of shares outstanding, diluted			116,516,747		121,711,311

NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - all figures in thousands of United States dollars)

	Three months ended March 31
		2012		2011
Net income for the period	$	13,943	$	32,799
Other Comprehensive income (loss): Change in fair value and impairment of available-for-sale securities, net of tax expense of $57 and  tax recovery $204 for the periods ended March 31, 2012 and 2011, respectively		352		(1,193)
Currency translation adjustment		(495)		143
Other comprehensive income for the period		(143)		(1,050)
Comprehensive income for the period	$	13,800	$	31,749
Attributable to:
Non-controlling interest		1,792		924
Equity holders of Neo Material Technologies, Inc.		12,008		30,825
	$	13,800	$	31,749

NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - all figures in thousands of United States dollars)

		Three months ended March 31
			2012		2011
Operating activities
Net income for the period			$	13,943	$	32,799
Add (deduct) items not affecting cash
		Depreciation and amortization		2,413		2,727
		Share-based compensation expense		7,264		4,625
		Accretion in carrying value of long-term debt		1,143		101
		Deferred tax		105		(5,023)
		Equity income of associates		(1,246)		(260)
		Impairment of available-for-sale investments		842		-
		Accrued benefit expense		14		11
		Loss on disposal of property, plant and equipment		37		192
		Interest expense, net of interest income		4,366		(514)
		Current income taxes expense		13,342		13,215
		Contingent consideration		20		-
		Other		(1,742)		1,291
Net change in other long-term liabilities				708		(729)
Income taxes paid				(15,055)		(5,775)
Net change in non-cash working capital balances related to operations				(20,630)		(60,209)
Cash provided by (used in) operating activities				5,524		(17,549)
Investing activities
		Acquisition of property, plant and equipment		(4,563)		(2,966)
		Loan repaid by third parties		11,807		-
		Proceeds from disposal of property, plant and equipment		25		-
Cash provided by (used in) investing activities				7,269		(2,966)
Financing activities
		Repayment of long-term debt		(50)		(64)
		Interest paid		(247)		(216)
		(Decrease) increase in bank advances and other short-term debt		(3,242)		4,901
		Repurchase of common shares for cancellation		(162)		(699)
		Issue of common shares		40		637
Cash (used in) provided by financing activities				(3,661)		4,559
Cash provided (used) during the period				9,132		(15,956)
Cash and cash equivalents, beginning of period				306,757		86,769
Cash and cash equivalents, end of period			$	315,889	$	70,813

NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited - all figures in thousands of United States dollars)

			March 31, 2012			March 31, 2011
			Number	Amount		Number	Amount
Share capital
	Authorized
		Unlimited common shares
	Issued
		Common shares
	Balance at beginning of the period		115,157,382	$	235,904	119,790,748	$	244,912
		Shares issued on exercise of stock options	25,000		56	270,600		951
		Shares purchased for cancellation pursuant to normal course issuer bid	(21,800)		(44)	(90,000)		(184)
	Balance at end of the period		115,160,582	$	235,916	119,971,348	$	245,679
Contributed surplus
	Balance at beginning of the period				-			5,099
		Stock-based compensation expense			505			117
		Modification of stock-based compensation plan			-			1,782
		Exercise of stock options			(16)			(314)
		Repurchase of common shares for cancellation			-			(515)
	Balance at end of the period				489			6,169
Retained earnings (deficit)
	Balance at beginning of the period				196,252			16,509
		Net income attributable to the equity holders of  Neo Material Technologies Inc. for the period			12,151			31,875
		Repurchase of common shares for cancellation			(118)			-
	Balance at end of the period				208,285			48,384
Equity component of convertible debentures
	Balance at beginning of the period				18,928			-
	Balance at end of the period				18,928			-
Accumulated other comprehensive income:
	Balance at beginning of the period				2,814			970
		Change in fair value and impairment of available-for-sale securities, net of tax expense of $57 and tax recovery of $204			352			(1,193)
		Currency translation adjustment			(495)			143
	Balance at end of the period				2,671			(80)
Shareholders' loan
	Balance at beginning of the period				(223)			(223)
		Repayment of loan by shareholder			-			-
	Balance at end of the period				(223)			(223)
Total shareholders' equity for the period				$	466,066		$	299,929
Non-controlling interest
	Balance at beginning of the period				12,344			3,445
		Non-controlling interest in earnings of       subsidiaries for the period			1,792			924
	Balance at end of the period				14,136			4,369
Total equity for the period				$	480,202		$	304,298

Michael Doolan
Chief Financial Officer
[phone], ext.335
Website: www.neomaterials.com
e-mail: [email protected] 

Ali Mahdavi
Investor Relations
[phone], ext. 225
e-mail: [email protected]